HNA agrees to acquire Ingram Micro for $6bn

April 2016 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

April 2016 Issue

The Chinese national economy, once a powerhouse of global growth, has experienced a considerable slowdown in recent years. As domestic demand and growth has faltered, Chinese companies have begun to aggressively pursue overseas deals. Indeed, 2015 saw Chinese companies spend more than $100bn on overseas targets.

The overseas activity of Chinese firms recorded in 2015 has begun to spill over into 2016. To that end, aviation and shipping conglomerate HNA Group has become the latest Chinese company to expand overseas. The company announced in February that it has agreed to purchase US electronic distributor Ingram Micro Inc for around $6bn. According to the terms of the deal, HNA unit Tianjin Tianhai Investment Co Ltd will acquire Ingram Micro for $38.90 per share in an all cash deal, a price which represents a 31.2 percent premium to Ingram’s closing price on Wednesday 17 February, the day before the deal was announced. Following the announcement of the deal, shares in Ingram rose 23 percent to $36.52 in after-hours trading.

The transaction has been approved by the boards of directors of both Ingram Micro and Tianjin Tianhai. The deal is expected to close in the second half of 2016, though it is still subject to the usual regulatory approvals in a number of jurisdictions, the approval of shareholders of both companies and the satisfaction of a number other closing conditions.

In a statement announcing the deal, HNA chief executive Adam Tan said Ingram Micro will “facilitate the internationalisation process of the group”. According to Mr Tan, the deal will help to facilitate the company’s overseas expansion. “With the help of Ingram Micro, HNA Group would have access to business opportunities in emerging markets, which have higher growth rates and better profitability,” he said.

Ingram Micro, which was founded in 1979, describes itself as a leader in technology and supply chain solutions. The firm employs around 27,000 people worldwide in its 122 global distribution centres. The company represents around 1700 suppliers, including some of the world’s largest technology companies, namely Lenovo Group, IBM, Microsoft, Cisco Systems and Apple. Ingram is one of the largest distributors of personal computers and other technology products in the world. Its product lines include printers, scanners, televisions, videogame consoles, video monitors and software packages.

Furthermore, the addition of Ingram Micro will help transform HNA into “a supply chain operator, and provide one-stop services while improving efficiencies,” said Mr Tan, adding that his company

looked forward “to supporting Ingram Micro’s management team and strategies, including continued expansion into new geographies, while also offering their vendor and customer partners access to new and complementary offerings.”

Once the deal has been completed, Ingram Micro will continue to operate as a wholly owned subsidiary of Tianjin Tianhai. The company is expected to retain its headquarters in Irvine, California. Furthermore, the company’s existing management team will likely remain, including Alain Monié, who will continue as chief executive. “As a part of HNA Group, we will have the ability to accelerate strategic investment, as we continue to capitalise on the constant evolution of technology and emerging trends by adding expertise, capabilities and geographic reach,” said Mr Monié in a statement. “Additionally, Ingram Micro will now be part of a larger organisation that has complementary logistics capabilities and a strong presence in China that can further support the growth and profitability objectives of our vendor and customer partners.”

According to regulatory filings related to the deal, Tianjin Tianhai will be required to pay Ingram a termination fee of $400m should the transaction collapse as a result of an antitrust investigation. Several Chinese transactions in the US have fallen victim to regulatory concerns of late. In February, Fairchild Semiconductor rejected an offer from China Resources Microelectronics Ltd and Hua Capital Management Co Ltd, citing concerns over the US approval process.

However, both Ingram and Tianjin Tianhai are confident that their deal will win regulatory approval. Dale R. Laurance, chairman of the board of directors of Ingram Micro, said, “HNA Group has a long and successful history of investing in and supporting leading global brands to advance the companies’ business objectives. HNA Group has a stated focus to grow globally and to invest further in the operations they acquire. The Board and I are confident that this transaction is in the best interest of our stockholders and that it will create an even stronger partner and value proposition for Ingram Micro’s vendors and customers around the world.”